Global political will did not match gas technology gains, forum told

Improvements in technology have increased global natural gas supplies, but delivery problems caused by US and international politics have kept vibrant worldwide markets many people expected 5 years ago from materializing, a senior fellow at the Istituto Affari Internazionali in Rome stated.

“Gas is an easily politicized commodity that producing countries can use to try to influence consuming countries’ policies. This helps explain international decision-makers’ reluctance to adopt measures to prevent this,” Nicolo Sartori said during the US launch of a book, “The Future of Natural Gas: Markets and Geopolitics” at the Atlantic Council on Sept. 22.

The growth of LNG is one positive trend, he said. “It’s important not only in Europe, but in China, which has embraced more LNG as a way to reduce its carbon footprint,” said Sartori, who wrote one of the book’s chapters. “Producing countries have had to respond, such as Russia, which has begun to liberalize its internal market.

“But the lack of political will is slowing down the emergence of potential producing regions such as the Eastern Mediterranean and North Africa,” he said. “Generally, the book shows how the technological and economic forces to transform the global gas market are there, but the political will has been missing.”

Jane Nakano, a senior fellow at the Center for Strategic & International Studies’ Energy and National Security Program, who also wrote a chapter for the book, said Japan’s response to changing global gas markets has been particularly significant. It has tried to diversify supplies away from Southeast Asia, because they have to move through the South China Sea, and buy more gas at prices that are not linked to crude oil, she noted.

“My chapter also looks at how the so-called US shale revolution could not have happened at a more fortunate time for the Japanese, particularly with changes in their domestic policies,” Nakano said.

“Lastly, there’s a geopolitical look at Japan’s relationship with China and Russia. It comes down to the primacy of Tokyo’s relationship with Washington, which constrains the parameters in which it can act.”

Limited pipeline options

But Russia also is the only country that has the gas resources that can be shipped to Japan by pipeline, Nakano said. Energy companies in Japan have become much more cautious about this pipeline trade proposal, she said. “When it comes to LNG, I think Japan is more hopeful as Australia has become the major LNG exporter in the region and US supplies are more favorably priced. It wants to make certain that whatever happens between Russia and China, Japan’s supply position isn’t undermined,” she said.

A third participant, Bud Coote, a resident senior fellow at the Atlantic Council’s Global Energy Center, said he did not contribute to the book, but had just finished reading it and strongly recommended it. “The future of gas is bright, but it’s also a bit smoky. The degree to which governments embrace it as a transitional fuel to move us from dependence on hydrocarbons to fuels which are friendlier to the climate is uncertain,” he stated.

The extent to which US and Russian gas compete for European markets is another uncertainty, Coote said. “Currently, low prices in Europe make it difficult for US LNG. Its competitiveness also has been hurt by the recent rise in Henry Hub prices to $3.24/MMbtu from $2[/MMbtu] earlier this year. Sales to Europe would need to be around $5[/MMbtu] to be economic. Russia would like to keep prices below that,” he said.

Asked whether Iran could become a bigger force on global gas markets in the next 5 years with its extensive Pars field reserves, the discussion participants said it’s uncertain. “Iran’s priorities are reinjecting gas into oil fields, improving its petrochemical industry, and satisfying domestic demand,” said Coote.

Nakano said, “I understand that Iran might need much of its gas to revitalize its oil production. Asian economies are still interested, but they also want the price to be right, especially with more US exports.”

Sartori noted, “The sanction situation still isn’t clear, which is discouraging investment. That might be different in 5 more years. Ironically, Iran was expected to supply gas for the Nabucco pipeline in 2003. If you look at where its gas fields are located, it makes more sense for Iran to export its gas as LNG to Asia than to try to build a pipeline to Europe.”

Contact Nick Snow at

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